The O2 sensor, or oxygen sensor, is a critical component in a vehicle's exhaust system that measures the level of oxygen in the exhaust gases. It helps the engine control unit (ECU) adjust the air-fuel mixture for optimal combustion, improving fuel efficiency and reducing emissions. By providing real-time data, the O2 sensor contributes to the overall performance and longevity of the engine. A malfunctioning sensor can lead to increased fuel consumption and higher emissions.